New from Prudential: Level Term Life to Age 65

Metropolitan Life Insurance Company has signed a multi-million dollar settlement with 22 states that resolves allegations of improper practices by MetLife in benefits under life insurance policies that had gone unpaid for years.

The agreement is expected to deliver millions of dollars in death benefits to state controllers’ offices, which will then seek to find the beneficiaries and pay them their benefits.

As part of the agreement, MetLife agreed to:

-Adopt business reforms strengthening efforts to locate policyholders and beneficiaries within 120 days of an insured’s death.

-Conduct quarterly matches for a year, and then monthly matches against the Death Master File to check for evidence that a person insured by Metlife may have died. If a match is found, the company will conduct a “thorough search” for the insured or beneficiaries using databases, mail, telephone calls and email (if available).

-If, within one year, an insured or beneficiary cannot be found, MetLife will report and pay the death benefit or annuity payment to the appropriate unclaimed property department.

-MetLife also agreed to search for insureds or beneficiaries of low-value or industrial life insurance policies that were sold in the early 1900’s up to 1964. Many of these policies were sold in Florida. MetLife is making extra efforts to gather information needed to identify these insureds. The industrial policies alone are estimated to include almost 15,000 Florida policyholders with over 9 million dollars in face value. The face value for national industrial life policies is expected to exceed 400 million dollars.

It is anticipated that upwards to 500 million dollars in benefits will be paid out pursuant to the settlement. The company will also pay 40 million dollars to state insurance departments. MetLife has agreed to strict business reforms to ensure it quickly pays out life insurance benefits.

“I am gratified that so many other state regulators have joined in signing this important agreement so we can move forward in helping consumers,” said California Insurance Commissioner, Dave Jones. “This will give piece of mind to MetLife policyholders and beneficiaries across the country, knowing that they can expect their life insurance benefits to be there when the time comes.”

If MetLife learns that a policyholder died, it must conduct a thorough search for beneficiaries, using contact information in its records and online search locator tools. If MetLife does not find a beneficiary within a year of learning of a death, it must transfer the benefit to the appropriate state controller as unclaimed property.

“This agreement represents another milestone in the ongoing coordinated multi-state multi-agency investigation to change industry practices. Consumers need to know that when purchasing insurance products critical to their financial security – a promise made is a promise kept,” said California Insurance Commissioner, Kevin McCarty. “We will remain vigilant in our review of other large insurance groups and anticipate concluding similar settlements with other companies to ensure that life insurance and annuity beneficiaries receive the benefits to which they are entitled.”

The practice addressed in this agreement involves life insurance companies determining if an insured has died by comparing policyholder records to the Social Security Administration’s Death Master File. Many companies have used this method to stop annuity payments, but have not used the same method to issue life insurance payments.

MetLife has agreed that it will do frequent comparisons of its policyholder information to the Death Master File and if it finds that an insured has died, it will either pay the beneficiary or send the policy benefit to the appropriate unclaimed property department within one year. The Florida agreements and orders apply to life insurance annuity contracts, and retained asset accounts held by MetLife. The agreements are expected to result in payments totaling more than 200 million dollars.

When an insured or beneficiary cannot be located, the insurance company is responsible for reporting and remitting the monetary value of the policy to the insured’s state department of unclaimed property. During Jeff Atwater’s tenure as CFO, the Bureau of Unclaimed Property has seen record returns, reuniting owners, heirs and businesses with more than one-third of all money returned since the beginning of the program, due largely to aggressive efforts to contact owners. There is no statute of limitations on unclaimed property, and citizens have the right to claim their property, or the earnings derived from their abandoned property, any time at no cost.

In early 2011, the National Association of Insurance Commissioners (NAIC) formed the Investigation of Life/Annuities Claim Settlement Practices Task Force chaired by McCarty to guide and coordinate the multi-state examination process. Both Prudential Insurance Company of America and its affiliates along with the John Hancock Life Insurance Company have already reached similar agreements.

The states of Florida, California, Illinois, North Dakota, New Hampshire and Pennsylvania are serving as lead states for examinations of the largest insurance companies. During this stage of the Task Force’s work, the focus has been on the largest 40 insurance groups, which comprise more than 92.4 percent of the market for life and annuity products nationwide.